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Nutrien’s US$1.8B N.B. mine writeoff illustrates dismal state of potash market

Saskatoon-based Nutrien Ltd., the largest potash company in the world, announced late Monday evening that it is closing a mine in Sussex, N.B. that cost billions of dollars to construct and that it had barely operated.

Marc Thorne, mayor of Sussex, said that the news arrived quickly. On Monday, the company asked for a meeting on short notice, and told him it planned to close its potash mine and return the site to nature.

“In four or five years, there may not be any indication that the mine was even there,” said Thorne.

The situation illustrates the dismal state of the potash market. Nutrien’s predecessor, the Potash Company of Saskatchewan, started building the mine in 2007 and finished eight years later at a cost of US$2.2 billion. During that time, the bottom dropped out of the potash market and prices fell 75 per cent from more than US$800 per ton to around US$225 per ton.

In early 2016, not long after construction finished, the mine was put on “care and maintenance” and 430 employees were laid off.

Now, Nutrien is taking a US$1.8 billion impairment charge, and closing the mine. That will save some $25 million per year, including the elimination of around 50 staff.

“We can expect to see that as savings in a year or two as we complete closure,” said Will Tigley, a spokesman for the company.

Overall, the company reported a US$1.1 billion net loss for the third quarter, or US$1.74 per share. Nonetheless, the company reported that retail earnings increased ten per cent year over year, and increased its dividend to 43 cents.

According to the U.S. Geological Survey, the potash market collapsed in 2009 as the broader global economy suffered. Potash prices had been high in the first half of the year, which led to a drop in consumption. But that drove up inventories, and the price fell and never fully recovered.

Mayor Thorne say losing potash mining has been a big blow to the people of Sussex, a town of around 4,300 people, located between Moncton and Saint John.

“It’s huge,” he said about the recently completed mine that is now being closed. “The headframe dominates the landscape from kilometres away.”

But he insisted the town has never been entirely reliant on mining, with agriculture and forestry running deeper in its history.

Thorne added that everyone in town had hoped Nutrien would “cut some salt” out of the new mine before decommissioning it, a prospect that might have created several dozen jobs. But no one expected the company to reopen the mine, he said.

I think everybody accepted the reality

Sussex Mayor Marc Thorne

“I think everybody accepted the reality,” said Thorne. “I’ve met on a frequent basis with the representatives and they’ve never indicated that they were going to reopen the mine.”

For nearly three years, the town has been working to absorb the shock of the closure. The original potash mine arrived in town in the 1980s and now Sussex is planning a future without potash mining.

Some of the people who were laid off started commuting to Saskatchewan to work for Nutrien there, while others found jobs in the dairy industry or in forestry, he said.

Thorne’s older brother, an engineer at the mine, was 57 in 2016, and stayed on for a year helping with maintenance, before leaving the company with two years’ severance pay. But he had always planned to retire at age 60, so the closure had no impact, Thorne said, adding that other families are still reeling from the impact.

“It’s still hard to believe that a company would spend $2.2 billion to build a mine and then write it off,” he said.

gfriedman@postmedia.com

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